Petrol, diesel a tad cheaper after duty cut; Centre’s loss in FY22 to be Rs 45,000 crore
A day after excise duty cut on petrol and diesel, around a dozen states, including 10 BJP-ruled ones, joined the Centre by slashing VAT or local taxes on the two fuels, making them cheaper by up to Rs 12 per litre in at least one state.
Brokerage Nomura, however, calculated the cost to the exchequer and said it will even widen the Centre’s fiscal deficit. The excise cut may cost Rs 1 lakh crore for this fiscal to the Centre or 0.45% of GDP.
Karnataka, Assam, Tripura, Manipur and Goa reduced VAT on both petrol and diesel by Rs 7 per litre. Uttarakhand reduced local taxes on petrol would by Rs 2 per litre in the state.
States including Delhi, Rajasthan, Gujarat, Ahmedabad, Sikkim and Bihar too reduced their local taxes on the fuels subsequent to the Centre cutting excise duty.
While Delhi saw a reduction of Rs 6.07 per litre on petrol and Rs 11.75 on diesel, Haryana and Sikkim announced a cut in their taxes, making the two fuels cheaper by about Rs 12 per litre.
Biju-Janta Dal-led Odisha announced a VAT reduction of Rs 3 per litre each on petrol and diesel. Bihar too reduced VAT by an equal amount.
Japanese brokerage Nomura, which calculated the losses to the central exchequer, said for the remaining five months of the fiscal year 2021-22, the Centre is likely to lose Rs 45,000 crore.
It said the fiscal deficit could go up to 6.5% as against the earlier expectation of 6.2% by the end of March 31, 2022.
Rating agency ICRA, however, said that improved mobility will partly offset the impact of excise duty cut on the government’s tax collection.
The Centre on Wednesday night announced an excise duty cut of Rs 5 per litre on petrol and Rs 10 per litre on diesel. However, it had hiked the duty on petrol by Rs 13 per litre and on diesel, by Rs 16 per litre last year.
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